Big changes for condos on July 1

The new Distressed Condominium Relief Act signed into law by Governor Crist on June 1 will take effect on July 1. There are provisions within Senate Bill 1196 that will have a significant impact on almost all Florida condo associations. Some highlights of the Act are;

Lenders liability for past due assessments in foreclosure
Lender's (First Mortgagee) liability for unpaid assessments when acquiring title through foreclosure or deed-in-lieu after July 1, 2010 is increased to the lesser of 12 months unpaid assessments or 1% of the mortgage debt. This is an increase from the lenders' current 6 months liability and a welcome aid for troubled associations with multiple foreclosures.

Association's right to collect rent from delinquent units
If a condominium-unit owner is more than 90 days delinquent in paying monetary obligations to the condominium association, the bill authorizes the condominium association to require that the condominium-unit owner's tenant, in lieu of paying rent to the unit owner, pay the rent directly to the condominium association to cover a unit owner's delinquent monetary obligations to the condominium association. This will put a halt to the all-too-common practice of unit owners collecting rent while not paying condo dues (and often not making mortgage payments as well).

Delinquent owners banned from the pool.
In addition to authorizing fines, a condominium association is authorized to suspend the right of a unit owner to use the common elements, common facilities or other association property until such unit owner has paid the required assessments (maintenance), as well as suspend the voting rights of the delinquent unit owner. This applies to any "monetary obligation" that is more than 90 days delinquent. It also extends to the unit owner's tenants, guests and invitees.

Fire Sprinkler System
The bill states that a condominium association cannot be required to retrofit its fire sprinkler system before the end of 2019 (instead of 2014). The association may still vote to forego retrofit. Buildings of less than four stories with exterior walkways providing egress are exempt.

There are several other provisions but these are the ones that will apply to the greatest number of associations in the Cocoa Beach and Cape Canaveral area. A complete synopsis of the bill can be read at Donna DiMaggio Berger's excellent condo law blog.

"Sometimes not getting what you want is an amazing stroke of luck."_________the Dalai Lama

Revisiting rental restrictions

Prospective condo buyers who haven't been reading this blog for long may benefit from reading a few posts from the past. Many buyers embark on a search for a condo without considering what issues are important to the selection of a unit. Some people never intend to rent their unit but many hope for some rental income to help with expenses. I've addressed the issues of rental restrictions on several occasions and for those buyers who haven't considered the impact of restrictions on their enjoyment and/or prospect of income from their unit, here are three good ones from last year that will, hopefully, assist in refining your search.

Ten questions for prospective condo buyers

Positive cash flow, does it exist?

Why rental restrictions matter

“Faced with the choice between changing one’s mind and proving there is no need to do so, almost everyone gets busy on the proof.” __________John Kenneth Galbraith

May sales

The month of May 2010, with 49 closed sales of MLS listed condos and townhouses in Cocoa Beach and Cape Canaveral, was the biggest May for condo sales in our market since 2006. This has been true for every other month so far this year except February. Only eleven of the total sold for more than $200,000 but only two were for less than $75,000. The sub-$75,000 condo market has been very active in recent months with a big supply of short sales and foreclosures but that supply appears to be drying up as investors have been actively buying those rock-bottom units. In another divergence from the trend, four units closed for over $500,000. I've been talking about the trouble in this market segment for a few years and the recent sales are confirming my predictions that the over-supply had to lead to considerable price reductions before sales would resume. The highest priced sale was a bank liquidation, the 3556 square foot, four bedroom penthouse at the Ocean Club in north Cocoa Beach that sold for $750,000. That's half the once asking price. Get the price low enough and buyers will make peace with a compromised view.

The northeast corner penthouse at 3800 Ocean Beach Blvd. closed for $675,000, three years after selling new for $1.1 million.

The former developer's model at Meridian of Cocoa Beach sold for $552,500, having sold new for $649,900 in 2007.

And the fourth of the half-million plus sales was a 7th floor Michelina that closed for $552,500, three and a half years after selling new for $865,000. We have passed crunch time for several new buildings that are sitting dead in the water right now. Either the note holders are going to continue to ignore reality while carrying these buildings (the strategy they've clung to so far) or they are going to have to take the same step that the Ocean Club bagholder was forced to take, keep reducing prices until the buyers are willing to step in. I can think of three new buildings in south Cocoa Beach with zero sold units and several others with less than 50% sold. All of these are luxury units with current asking prices from $475,000 to over a million and, so far, itty bitty price reductions have failed to produce more than a couple of sales. Stay tuned, tipping point approaching.

"How people treat you is their karma; how you react is yours." _____Wayne Dyer

Just around the corner

The crew at Walker Bagwell Properties has moved it's offices just around the corner to 125 N. Brevard Ave., across the street from the Pompano Grill. Look for the beautiful ancient live oak tree out front.

Out of the 33 closed condos and townhomes closed so far this month in Cocoa Beach and Cape Canaveral, only four sold for more than $250,000. Interestingly, of those four, three were in weekly rental complexes, two in Boardwalk and one in Sandcastles. Look for a comprehensive wrap-up of the month's stats early next week.

"He who hesitates is poor."___Mel Brooks

Shifting dynamics

Our MLS condo inventory in Cocoa Beach and Cape Canaveral appears to have stabilized at around the 600 unit level having been below that number for the last seven months. In May 2006 inventory was close to the peak at 1047 units while today, four years later, we stand at 581 total MLS-listed condos and townhouses in the two cities ( short sales and bank-owned units are down to 19% of the total). With monthly sales running at almost the same level as sales in 2006, and 45% less inventory, there appears to be a dynamic building that, absent a flood of new inventory, could impede continued price erosion. This is not a bottom call, just an observation of market conditions that haven't existed for some time. There is still an unknown quantity of underwater and otherwise troubled owners who are not yet represented in the actively for sale numbers but we know from the stats that a significant number of the distressed owners have already been shaken out in the brutal decline of the last three years.



The predicted higher mortgage rates have not materialized so far. Rates have been in a steady retreat since March with the average rate for 30 year fixed rate mortgages back below 5% this week. I was made aware yesterday of new mortgage money available for Florida condo loans to qualified borrowers with 25% down. Those of you paying cash need to get your proof-of-funds documentation together before offering. All foreclosures and many other sellers are going to require proof of funds if you offer cash. Proof of funds documentation is usually an account statement in your name (account numbers can be blacked out) showing liquid funds in excess of the purchase price or a letter from your banker stating the same. Don't grump. This is no different than having to document credit worthiness when applying for a mortgage and is just part of the process.




"There is nothing wrong with change, if it is in the right direction."
______Winston Churchill

From April showers to May flowers

The little house on the hill that's been home for the last week. Almost the exact same distance from Cocoa Beach as Marathon in the Florida Keys.

Not surprisingly, the real estate market in Cocoa Beach and Cape Canaveral did not grind to a halt in my absence. There have been eight new single family home listings, all in Cocoa Beach, at prices from $143,000 for a a small 2 bedroom 2 bath in Cocoa Isles to $469,000 for a nicely remodeled pool home on canal with boat dock and lift off Minutemen. Of the 13 price reductions on other homes during the same time, none were significant. Five single family homes closed during that time at prices between $94,900 for a small, foreclosed 3 bedroom 1.5 bath cottage on Woodland in Cocoa Beach to $380,000 for a big (3061 sq. ft.) 3 bedroom, 3.5 bath on Ridgewood in Cape Canaveral.

The condo market, as always, was much more active. There were 33 new listings during the same 12 day period. Prices began at the low end at $29,900 for a small, Fannie Mae owned studio at Essex House in Cocoa Beach. The highest priced new listing ws for the northeast penthouse unit at 3800 in Cocoa Beach. This 5th floor unit sold for $1.1 million new in 2007 and is offered now for $774,900. I expect some action on this one as the seller is offering an obscene buyer's agent bonus on top of the commission. Two very optimistic Meridian sellers are offering their units for $669,000 and $724,900, both more than they paid new a few years ago.

Other new listings of interest include a Park Place top floor southwest corner with a southern ocean view for $269,900. A 2nd floor corner, direct ocean 2/2 Windjammer in Cape Canaveral hit at an asking price of $214,500.

A total of 21 units have closed as of this morning so far this month at prices from $33,250 for a 1/1 Star Beach unit in Cape Canaveral to $355,000 for a 6th floor nicely remodeled 3/2 Crescent Beach Club unit in south Cocoa Beach. Two Boardwalk 2/2 direct ocean units in downtown Cocoa Beach closed for $312,000 and $340,000. These units both had garages and weekly rentals are allowed.

A direct river River Bend 3/2 in south Cocoa Beach closed for $307,000. A 7th floor, north facing Sandcastles 2/2 with garage closed for $260,000. Weekly rentals allowed. And the smoking deal of the month so far, a lakefront, ground floor Harbor Isles 2/2 with garage closed for a shocking $110,000.

Look for more updates in the next few days.

"No vacation goes unpunished." ____Karl Hakkarainen

A little break

Larry is taking a little break from the hamster wheel and will not be posting again until after May 15 when he returns from chasing fish and waves on his favorite tropical island. Unless things have changed drastically in the last six months, cell phone coverage and internet are not readily available. Those of you needing help with Cocoa Beach real estate in the meantime can contact the most capable Danielle in Larry's office in his absence. Her email is danielle@walkerbagwell.com

As a quick follow up to the last post about slack listing agents, the agent who hadn't return the call to request showing her listing has still not returned the call a week and a half later. She has company. I called another listing agent last Thursday to show his listing. Again no answer and I left a message requesting showing instructions. I left another message a couple of hours later. As of this morning, Sunday, still no returned call. His clients must think that the market really sucks as they are priced well below the comps after reducing the price by over a third since November and are still getting no showings. Your regularly scheduled programming here will resume in two weeks. Hasta luego.

"Fishing is much more than fish. It is the great occasion when we may return to the fine simplicity of our forefathers. "_____Herbert Hoover

"None but natives ever master the art of surf-bathing thoroughly."_______Mark Twain

Slack and slacker

All 96 of the sea oat seedlings that I planted on
the beach a couple of months ago are flourishing.
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I am showing four condos today. I called yesterday for showing instructions. Two of the offices required that I call the listing agent directly for showing instructions. Neither of those agents answered their phones. I left messages for both. One called three hours later and told me that there was not a lockbox on the 3-day old listing but that she would try to get one on before my showing today. I'm cautiously optimistic that we will be able to get in that unit. The other agent has yet to return my call. I wonder if her clients, the sellers, are aware that some potential buyers can't gain access to their unit.

Incidentally, when the first agent returned the call I suggested that she mark her lockbox when she left it so that I and other buyers' agents could distinguish which box belonged to her listing. This particular building has a secure lobby and all lockboxes are in the same area outside. She responded that that wouldn't be necessary as hers was the only listing in the building. Unknown to her, there is another much nicer listing in the building that is priced $100,000 less than hers. It's been on the MLS for 30 days. Also of interest is the fact that the last four sales in the building, all of units in better condition than hers, were for prices at least $150,000 less than her quixotic, blue sky number. It's clear that this agent did not do any research before taking this listing. We are looking at the unit today knowing that at some point in the future, if the sellers are serious about selling, they will have to price it realistically and perhaps we will still be in the market at that time.

These are not isolated incidents. There are many agents and brokerages that contribute more obstacles than solutions for their clients who are hoping to sell. Sellers would be well-advised to do a little homework before selecting a listing agent. A lazy or unqualified listing agent will, at best, hinder and, worst case, prevent a listing from selling. There are many professional and knowledgeable listing agents and offices. Seek them out if you want to sell. By the way, the other offices that I contacted yesterday had showing instructions at their fingertips and I was cleared to show within a few seconds of calling.

"...you gotta buy groceries before you can cook."
______Spinal Tap